Ardoin Enterprises has to determine its cost of capital using the following information:

The firm has $40,000,000 in corporate bonds currently selling at 97.5. (Bonds sell at a percentage of par value) The bonds mature in 12 years and have an annual coupon rate of 6.9% paid semiannually. The firm faces a 32% tax rate and has 1,500,000 shares of preferred stock that pays a dividend of $0.80 per year and currently sells for $9.10 per share.

Common stock selling for $3.58 per share has just paid a dividend of $0.32 and is expected to grow by 4% forever. The firm has a beta of 1.42 and the risk-free rate on treasury securities is 2.25%. The average return on the S&P500 is 10.54%.

Calculate the cost of capital for the firm. Ardoin Enterprises has 25 million common shares outstanding.